Reality and Market Direction
From 1990 to 1997, Kevin Haggerty served as Senior Vice President for Equity Trading at Fidelity Capital Markets, Boston, a division of Fidelity Investments. He was responsible for all U.S. institutional Listed, OTC and Option trading in addition to all major Exchange Floor Executions. For a free trial to Kevin’s Daily Trading Report, please click here.
The SPX followed the -3.3% loss on Thursday with a -2.3% loss on Friday, which made it the worst Jan ever for the SPX at -8.6%. Also, February is the second worst seasonal month to September, and for the COMPX it is the worst, so in addition to the “great pork robbery†they are trying to pull off in Washington the market will be fighting an uphill battle this month (at the least) I see no immediate positive catalyst that will accelerate a sustained run in the major indexes.
NYSE volume was 1.3 billion shares yesterday with a Volume Ratio of 38 and breadth neutral at -238. There was a positive divergence in Techs, Medical, and selected Bio-Tech stocks versus the SPX which went out almost virtually unchanged at 825.43 (-.05) and the INDU at 7937 (-0.8). The small caps also out performed with the IWM -0.8.
As you can see on the included chart, the SPX is in a short term (ST) downtrend from the 944 high, and is still in the larger channel uptrend from the 741 low. The SPX bounced off that line yesterday as it made an 812.87 intraday low on the 9:55AM bar within a narrow 5-bar range between 816.92-812.87 The Trap Door entry taken above 816.92 on the 10:00AM bar ran to an 830.28 high before reversing so trading service members had good morning.
If there is some more weakness today the SPX will again be ST-O/S, measured by the 4-day MAs of the VR and breadth. Nothing significant on a ST trend basis happens on the downside unless the 804.30 swing point low gets taken out the same on the upside for the 878 swing point high. There is some time symmetry the next few days, and the odds favor a downside air pocket before a bounce, especially if the rhetoric doesn’t lighten up in Washington, or else some reality is put back into the “pork billâ€, and I doubt that will happen enough to make the needed difference anyway.
Have a good trading day!
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